No. 87-441
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
KIRK HAMMERQUIST, d/b/a KIRK
HAMMERQUIST CONTRUCTION,
Plaintiff and Appellant,
-vs-
EMPLOYMENT SECURITY DIVISION OF
THE MONTANA DEPARTMENT OF LABOR AND
INDUSTRY,
Defendant and Respondent.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Leif Erickson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard DeJana, Kalispell, Montana
For Respondent:
David Scott, Dept of Labor & Jndustry, Helena, Montana
Submitted on Briefs: Jan. 7, 1988
Decided: February 11, 1988
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
The Montana Unemployment Insurance Division ruled that
Kirk Hammerquist must pay unemployment insurance taxes on
certain earnings of Charles Hornbacher, whom Mr. Hammerquist
argued was his partner or a joint venturer, not an employee.
The District Court for the Eleventh Judicial District,
Flathead County, affirmed the administrative ruling. Mr.
Hammerquist appeals. We affirm.
We restate the issue as whether the District Court and
the hearing officer incorrectly applied the law in determin-
ing whether the parties were in a joint venture or
partnership.
Mr. Hammerquist is a building contractor in the Flathead
Valley. During 1984, he was low bidder on a contract for
building a home and on two smaller projects. Charles
Hornbacher performed construction work on all three projects.
For his work on the home, Mr. Hornbacher was paid $500 per
week out of Mr. Hammerquist's checking account. Mr.
Hornbacher also bid and completed other jobs by himself
during this time. Both Mr. Hornbacher and Mr. Hammerquist
have testified that they were partners in the jobs on which
they worked together.
The Montana Unemployment Insurance Division determined
in July 1986 that work performed by Mr. Hornbacher on the
Hammerquist projects during 1984 was employment for unemploy-
ment insurance tax purposes. Mr. Hammerquist appealed that
determination and a hearing was held before a hearing offi-
cer. The hearing officer also concluded that the work per-
formed by Mr. Hornbacher for Mr. Hammerquist was employment.
That decision was appealed to the Board of Labor Appeals,
which also sustained the decision. Mr. Hammerquist then
petiti-oned for judicial review, and the District Court
affirmed the agency decision, concluding that "substantial
evidence exists in the administrative record to support the
decision made by the appeals referee."
Did the District Court and the hearing officer incor-
rectly apply the law in determining whether the parties were
in a joint venture or partnership?
Our standard of review of agency findings of fact is
discussed at some length in City of Billings v. Billings
Firefighters (1982), 200 Mont. 421, 430-31, 651 P.2d 627,
632. Section 2-4-704(2) (e), MCA, allows findings of fact to
be overturned when they are clearly erroneous in view of the
reliable, probative, and substantial evidence in the whole
record. In City of Billings we concluded that if there is
substantial credible evidence in the record to support the
findings of fact, then the findings are not "clearly errone-
ous" and the findings will be affirmed. We also pointed out
that conclusions of law are subject to an "abuse of discre-
tion" review because of the Court's expertise in interpreting
and applying the law.
Montana's Unemployment Insurance Law, Title 39, Chapter
51, MCA, requires that employers make contributions to the
Department of Labor and Industry with respect to wages paid
for employment. Section 39-51-1103, MCA. Mr. Hamrnerquist
does not dispute that he is an employer. The hearing offi-
cer's findings and conclusions first set forth the definition
of wages in S 39-51-201(18) (a), MCA: "all remuneration
payable for personal services. . .." The hearing officer
then discussed the issues of whether the $500 Mr. Hornbacher
received each week was "wages" and whether Mr. Hornbacher was
a partner of Mr. Hamrnerquist:
The income received by Mr. Hornbacher falls
within the term "wages" as defined above. The
$500.00 per week "draw" was remuneration for per-
sonal services in construction of the buildings
completed. While the employer prefers to designate
the wages as profits, the record will not support
such a finding. Therefore, no inference of a
partnership is drawn and the existence of a part-
nership must be established from some other area.
The employer defines the relationship between
him and Mr. Hornbacher as a "partnership". No
partnership agreement was ever executed. A part-
nership name does not appear on any document.
Checks were issued but only to the employer, and
neither filed income tax as a partnership. Addi-
tionally, no accounts or correspondence identified
them as partners. Quite to the contrary, the home
owner individually hired Mr. Hammerquist. "I hired
Kirk Hammerquist. . . and knew Mr. Hornbacher
worked with him in partnership." This appears to
be a broad application of the word partnership by
the owner. Based on the record presented which
shows all the materials, correspondence, and pay-
ments made individually to Mr. Hornbacher[sic], and
the absence of any documentation showing the exis-
tence of a partnership, the hearing officer is
unable to make a finding that a partnership existed
as that term is defined in Montana law.
The hearing officer then went on to analyze the "ABC test"
used under S 39-51-203(4), MCA, to distinguish employment
from work by an independent contractor.
Mr. Hammerquist argues that the hearing officer improp-
erly used the "ABC test" to determine that Mr. Hornbacher was
his employee. Mr. Hammerquist asserts that this test is only
proper when the question is whether the person is an indepen-
dent contractor or an employee, not when the question is
whether the person is a joint venturer. However, the hearing
officer set forth the above discussion before he applied the
"ABC test". The above discussion represents the considera-
tion of the partnership or joint venture argument. The
discussion is phrased in terms of partnership instead of
joint venture, as was the testimony of the witnesses at the
hearing. After reaching a conclusion that he was unable to
make a finding that a partnership existed, the hearing offi-
cer discussed the "ABC test". We conclude that the hearing
officer did not use the "ABC test" to determine whether there
was a partnership or joint venture, and we hold that the
legal standard employed by the hearing officer was proper.
Mr. Hammerquist also argues that there is no evidence
contradicting the existence of a joint venture, and that the
decision of the hearing officer should therefore be reversed.
One of the elements necessary to show joint venture is an
equal right to a voice in the direction of the enterprise,
giving an equal right of control. Sumner v. Amacher (1968),
150 Mont. 544, 554, 437 P.2d 630, 635. The facts that the
contract was signed only by Mr. Hammerquist and payments were
made only to him do not indicate equal control of the ven-
ture. Mr. Hammerquist and Mr. Hornbacher had no partnership
or joint venture accounts, did not file income tax as a
partnership, and did not sign any contract or papers as a
partnership or joint venture. Any materials purchased for
the jobs were purchased through Mr. Hammerquist's personal
accounts with the suppliers. We conclude that Mr.
Hammerquist failed to prove the existence of a joint venture.
We hold that substantial evidence supports the hearing offi-
cer's finding and conclusion that no partnership or joint
venture was shown.
Affirmed.
- Justices